Leeds Building Society is looking at growing its first-time buyer lending and investing in technology, and it also backs affordability reform, its CEO has said.
Richard Fearon (pictured) said: “Leeds Building Society has had a very significant proportion of our lending first-time buyers for a number of years now, and our expectation, and hope, is that [it] continues. I would like to see that we’re supporting more first-time buyers this year than last and that’s one of the key goals we’ve set ourselves.”
The mutual reported gross mortgage lending of £5.7bn in 2024, with around 47% of new lending coming from first-time buyers.
Fearon said there was “a lot of demand” from first-time buyers. However, he said he was “conscious” that there was a bit of a “race” for people to complete before the stamp duty deadline, so the “expectation is that there may be a bit of a drop-off in completions after that”.
An important part of Leeds Building Society’s first-time buyer proposition includes its Income Plus Range, which was launched in December last year and has been its “most successful mortgage product launch ever”, according to its results.
“We’re obviously excited to see the full-year benefit of that. I think we’re getting fantastic feedback from brokers on that, it’s been really positive,” Fearon said.
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Leeds Building Society is looking at widening Experian Boost and tech investment
Fearon said Leeds Building Society’s partnership with Experian has been “really successful”. The mutual partnered with Experian to allow borrowers to use free “boosted” credit scores.
Its results show that the partnership has helped boost credit scores for over 4,100 mortgage applications, with nearly two-thirds being first-time buyers.
Fearon said: “We’re continuing to improve the boosting. One of the things we want to do is we are seeking to try and factor in the benefit of rent payments in Experian, that would be a really big deal for us and for Experian to get to that point. That’s something we are working on.”
He explained that, in the past, rental history has been a challenge, as lenders have to comply with mortgage affordability rules in terms of what can be taken into account, and rent payments can be “described in many different ways and different names, so it is harder to extract the information in a robust way”.
However, Fearon noted that the regulator was looking at rental payment as a part of making more affordability rules more flexible.
He noted that it was “making a huge technology investment this year and over the coming years”.
One example includes adding further advances to its Mortgage Hub in May this year, so further advances will be available for brokers.
Cash ISA changes are ‘bad idea’ but affordability tweaks needed
Fearon reiterated that he thought proposed cash ISA changes would be counterintuitive.
He noted that building societies accounted for around 40% of the cash ISA market, so changes would significantly impact this sector.
“If the limits were significantly reduced, that would impact the flow of funding [for building societies], and that would mean that mortgage costs are higher, so it’s really important to get that certainty.
“We think changing limits is unlikely to create greater investment in the UK, and it will just lead to bigger tax bills for savers and higher repayments and mortgage customers, so we think it’s a bad idea,” he said.
Fearon noted that the cash ISA feedback from Leeds Building Society members was that they “really like the fact that they save their money with us, and it goes towards helping others buy a home”.
“I think I’m hopeful that, over time… more brokers, as well as thinking about certainty and the experience, that customers have that opportunity to have a conversation about taking a mortgage out with a building society because of the model and the fact that the money is invested for customers’ benefits.
“I’m hopeful that, over time… they’re seeing that building societies are the ones innovating, growing and providing a fantastic experience,” he said.
When asked about what Leeds Building Society would like to see from the Spring Statement, he mentioned ensuring there is good funding for an affordable homeownership programme, especially for shared ownership and “really starting to see delivery on the targets for housebuilding”.
He added that reforms of the planning process were “really important”, but these “would take a couple of years to flow through the development pipe”.
Changes to the loan-to-income (LTI) cap, which would come from the regulator, would really help, especially changing the 15% cap on lending at four-and-a-half times income or higher, with Fearon noting that it is a “real constraint on first-time buyers”.
He added that it was crucial that building societies are supported, noting: “We are growing so strongly, it’s about continuing to support or provide the conditions to support that growth, and not doing things [that] will push in the opposite direction.”
‘Good ground for optimism’ for mortgage market this year
Fearon said there was “good ground for optimism”, pointing to Leeds Building Society’s arrears improvement and falling mortgage pricing
“People have coped well with the higher mortgage costs. We’ve obviously seen mortgage rates come down from kind of the peaks of the mini Budget. They’re down now to just below 4% in some cases. I think, as that’s happened, we’ve seen more demand come into the market, and the market grows, so… those are both optimistic things,” he said.
Fearon said it was “tough to call where rates will go” as there’s a “battle between inflation being slightly above target and economic growth being a bit weak”.
He said the market was expecting two more cuts to the base rate this year, and that was already priced into mortgage rates, but if that changes, then it “will flow through to mortgage rates”.
Fearon said Leeds Building Society was “absolutely committed to the broker market”, as the vast majority of its lending is through brokers.
He said the firm wanted to “thank all our intermediary partners for everything they’ve done to support our performance”.
Fearon added that it would “continue to invest in making experience better for brokers”.
